The Impossible Dream

Business, career, dreams, success concept. Man reaching for star on ladder. - The Impossible DreamUS debt is out of control; inflation is still rising. Fed Chairman Jerome Powell is tasked with fixing a historic mess. The star is unreachable….

The Glass Steagall Act was passed in 1933. Until its repeal under the Clinton administration in 1999, the Federal Reserve had no “emergency” banking system bailouts. Less than a decade later things blew up, and the Fed went on a historic lending spree, bailing out “Too Big To Fail” banks.

The Fed flooded the banking system with money, increasing their balance sheet nine-fold, to $9 trillion.

FRED Chart: Assets: Total Assets (Less Eliminations from Consolidation): Wednesday LevelThe government chimed in; spending trillions more than it collected in tax revenue.

The US Debt Clock keeps score.

US National Debt - Debt per citizen and debt per taxpayer

US debt increased from $8 trillion to over $34 trillion. Federal Debt, as a percentage of GDP, skyrocketed from 64% to 123% in 15 years.

A Hirschman Capital study shows that out of 51 cases of govt debt breaking above 130% of GDP since 1800, 50 governments have defaulted. The only exception, so far, is Japan.

The Debt Clock predicts government spending over 150% of GDP by 2028. Can Powell beat those odds with no help from the government?

US Federal Debt to GDP Ratio

Bill Bonner tells us:

“Almost all (the government fixes) was imposed on the economy (unnecessarily). …. In other words, the US debt represents the attempts by the elites to solve problems – real and imaginary – by shifting money and power to themselves in the present…while pushing the real costs onto future generations.

Known collectively as ‘the Swamp’ or the Deep State in America…. Milei in Argentina calls them the ‘political caste’…they are the deciders who solve the problem, whether there is one or not.

And now, in most countries in ‘The West,’ they have solved so many crises that the whole system staggers under the weight of their solutions.

Big Loss coming soon.”

The political dogfight is a sham. Bill Bonner’s article, Washington D. C. First nails it, discussing the upcoming election:

“In the contest that most matters – the common man against a corrupt elite – they are both on the wrong side. ….

Faux Funds

“There is nothing which I dread so much as a division of the republic into two great parties, each arranged under its leader, and concerting measures in opposition to each other. This, in my humble apprehension, is to be dreaded as the greatest political evil under our Constitution.”

— John Adams

…. Any dope could see that this was a scam. You can’t replace real wealth with pieces of paper….

Lie after lie…fraud upon fraud…jackassery on top of jacked-up half-truths….

…. One of the biggest lies in the Land of the Free was that the two parties gave Americans a choice…that democracy allowed the ‘will of the people’ to prevail…and the wisdom of the masses – often late, but never wrong – would set things right.

This was one of the biggest lies of all. By 1999, Republicans and Democrats had come to share a single bipartisan vision for the future of the country:

Washington First!”

How To Find A Financial AdvisorWhile the Fed likes to depict Chairman Powell at the helm, carefully guiding our economy through rough waters, it’s a joke. When asked about a “soft landing,” former Fed Head Janet Yellen reassured us:

“I agree that it is an unusual thing to have happen. And it certainly takes skill on the part of the Fed to calibrate monetary policy properly. But if you just look at the data, it looks as though that’s the path we’re on.”

Bill Bonner continues:

“Alan Greenspan. Ben Bernanke. Janet Yellen. None of them thought debt was worth mentioning. And so, while the men and women at the helm changed…no course correction was made. The ship just went further and further towards the lip of the financial world, where economies plunge into chaos and catastrophe.

…. This warning will come like a fire-alarm test in a cruise ship. No way are people going to go out onto a cold deck in their underwear. ‘The ship has never sunk before,’ they’ll say to themselves; ‘it won’t be this time either.'”

Yahoo Finance reports:

“Most everyone understands the U.S. national debt is not on a long-term sustainable path, but no one seems sure when the breaking point might be for real-world consequences.

In a recent ’60 Minutes’ interview, Federal Reserve Chairman Jerome Powell brought up the elephant in the room, stressing that it’s now ‘time, or past time, to get back to an adult conversation among elected officials about getting the federal government back on a sustainable fiscal path.’

Frustration and worry were visibly apparent in the usually poker-faced Powell, who said that we’re ‘borrowing from future generations.’ Taking on more debt is just another word for borrowing, and with the massive size of the debt, it won’t be paid back overnight.

…. What’s most troubling is not the absolute number of the $34 trillion debt, but the pace at which it’s increasing and the rising cost of interest payments to service it….

With the Fed maintaining high interest rates as part of its effort to completely stamp out inflation, it makes both new borrowing and interest payments on that money borrowed even more expensive for the U.S. government.

The U.S. spends more in gross interest payments on its debt than on national defense.”

Meanwhile legendary investor John Hussman claims:

“Based on dozens of measures…current market conditions now ‘cluster’ among the worst 0.1% instances in history – more similar to major market peaks and dissimilar to major market lows than 99.9% of all post-war periods.

“I call this the ‘Cluster of Woe’ because the handful of similarly extreme instances…were typically followed by abrupt market losses of 10%-30% over the next 6-10 weeks (average -12.5%), with losses at the smaller end of that range often seeing deeper follow-through later.”

The Fed at the helm

Wolf Street explains:

“The Fed Wants to Drive QT as Far as Possible Without Blowing Stuff Up….

Today the Fed made it official in the FOMC meeting minutes: It doesn’t know how far it can take QT (quantitative tightening) without blowing up stuff, but it wants to reduce its balance sheet as far as possible without blowing up stuff. …. And so far, nothing has blown up.

The minutes made five important points about the future of QT:

  1. So far, so good, everything is cool with QT. No hurry to change anything.
  2. QT is an important part of getting inflation down.
  3. The Fed doesn’t know how low the balance sheet can go without blowing up stuff.
  4. Slowing QT would allow the Fed to reduce its balance sheet further than if it kept going at the current speed, as it would lower the risk of something blowing up, which would force the Fed to end QT prematurely (see QT-1).
  5. Even after the Fed starts cutting rates, QT can continue ‘for some time.'”

Inflation is still accelerating. Wolf Street headlines, “Worst Monthly Spike of ‘Core Services’ PCE Inflation in 22 Years, …. Powell’s Gonna Have Another Cow.”

Even year-over-year, core services inflation has now reversed and accelerated to 4.1%.

Wolfstreet Chart: Core Services PCE Price Index, Percent, Year over Year

…. The bad behavior of core services inflation…is why Fed governors have said this year in near unison that they’re in no hurry to cut rates, but have taken a wait-and-see approach. And now the concept of rate hikes is cropping up in their speeches again.”

When To File For Social Security Special Report – Click Here!Powell’s challenges

“All depressions are caused by government interference and the cure is always offered to take more of the poison that caused the disaster. Depressions are not the result of a free economy.”

— Ayn Rand

50 of 51 countries with our kind of debt have defaulted, and a 99.9% chance of a major market correction. Historic headwinds no matter what choice; each leading to terrible consequences for America.

Does Powell protect the stock market, elite and “too big to fail” banks (who own the Fed) or the American people who bear the brunt of high inflation?

Powell continues to try to burn the candle at both ends, trying to bring inflation under control while avoiding a much-needed major market correction.

The markets fully expect Powell to “pivot” and drop interest rates, protecting the elite as they have been doing since 2008. Paul Volcker taught us, if the Fed pivots too quickly, high inflation soon follows. Why not leave interest rates as they are, close to historical norms?

Powell is given an impossible task; particularly with Congress making no attempt to rein in spending.


To dream the impossible dream
To fight the unbeatable foe
To bear with unbearable sorrow
To run where the brave dare not go

To right the unrightable wrong
To love pure and chaste from afar
To try when your arms are too weary
To reach the unreachable star

This is my quest to follow that star
No matter how hopeless, no matter how far
To fight for the right without question or pause
To be willing to march into hell for a heavenly cause

And I know if I’ll only be true to this glorious quest
That my heart will lie peaceful and calm
When I’m laid to my rest

And the world will be better for this
That one man, scorned and covered with scars
Still strove with his last ounce of courage
To fight the unbeatable foe
To reach the unreachable star

Politics will prevail

Cartoon man with screw going through his body - Are We Really Screwed?Why would anyone want to run for president? Something’s gonna break; either the market or rampant inflation (possibly both?) and the party in power will shoulder the blame. (Another Herbert Hoover?)

Powell is screwed, he will be made the fall guy; politicos will blame each other, while America foots the bill.

Why isn’t the media blaring about Powell calling for, “an adult conversation among elected officials about getting the federal government back on a sustainable fiscal path?”

Reality is being ignored by the elite. Are there any adults left in the swamp willing to work together to solve the real problems at hand? Does that describe the political climate in Washington or the world today?

It seems so simple, Glass-Steagall worked for 66 years, it should be reinstated and the banks brought back under control. Optimist friend Chuck Butler reminds us that “politicians will work together for the good of the people, when it is also in their best interest.” I hope he is right.

Next week we will discuss how we can protect ourselves. Stay tuned!

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On The Lighter Side

Daylight Saving Time (DST). Blue sky with white clouds and clock. Turn time forward (+1h).Daylight Saving Time starts this weekend. Don’t forget to move your clocks forward an hour – except here in Arizona where we stay on the same time all year. I like that because, as a sports fan, we’re effectively on Pacific Daylight Time for the summer. All the late-night games start an hour earlier so it’s easier to stay awake for the events in the Eastern time zone.

Spring training baseball is in full swing. There is something special about springtime, renewed hope and energy and the plants and flowers begin to bloom once again.

College basketball and March Madness is beginning and that is always fun. Arizona is ranked in the top 8, it will be interesting to see how far they go this year. It’s always fun to see some small school emerge, surprise everyone, and become the sentimental favorite for much of the nation; with the exception of the bettors….

Quote(s) of the Week….

Thomas Jefferson chimes in: (He was a genius!)

“I, however, place economy among the first and most important virtues, and public DEBT as the greatest of the dangers to be feared.”

“I sincerely believe that banking establishments are more dangerous than standing armies.”

“The issuing power (of currency) should be taken from the banks and restored to the people to whom it properly belongs.”

“The end of democracy and the defeat of the American Revolution will occur when government falls into the hands of lending institutions and moneyed incorporations.”

“When once a Republic is corrupted, there is no possibility of remedying any of the growing evils but by removing the corruption and restoring its lost principles, every other correction is either useless or a new evil.”

And Finally…

Friend Alex N. shares some political truisms:

  • If God wanted us to vote, he would have given us candidates. — Jay Leno
  • The problem with political jokes is they get elected. — Henry Cate, VII
  • We hang the petty thieves and appoint the great ones to public office. — Aesop
  • Politicians are the same all over. They promise to build a bridge even where there is no river. — Nikita Khrushchev
  • When I was a boy I was told that anybody could become President; I’m beginning to believe it. — Clarence Darrow
  • Politicians are people who, when they see light at the end of the tunnel, go out and buy some more tunnel. — John Quinton
  • Why pay money to have your family tree traced; go into politics and your opponents will do it for you. — Author unknown
  • A politician is a fellow who will lay down your life for his country. — Tex Guinan
  • Instead of giving a politician the keys to the city, it might be better to change the locks. — Doug Larson
  • We’d all like to vote for the best man, but he’s never a candidate. — Kin Hubbard

And my favorite:

  • Politics is supposed to be the second-oldest profession. I have come to realize that it bears a very close resemblance to the first. — Ronald Reagan

Until next time…

Dennis Miller

“Economic independence is the foundation of the only sort of freedom worth a damn.” – H. L. Mencken


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